Shares of Robinhood Markets (HOOD 4.44%) were flying higher this week as the company cashed in on the latest crypto boom. Bitcoin (BTC -1.37%) hit its highest levels in more than a year this week, topping $44,000 per token on hopes for a new Bitcoin ETF. The rest of the crypto sector rose broadly on those tailwinds, shrugging off news that Binance, the world's biggest cryptocurrency exchange, was fined more than $4 billion for not preventing money laundering on its platform and that founder Changpeng Zhao pled guilty to a felony and stepped down as CEO.
Over its history, Robinhood's success has been closely linked to crypto, and that relationship was on display again. As of Thursday's close, Robinhood stock was up 23.2% for the week, according to data from S&P Global Market Intelligence.
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Robinhood stages a comeback
The resurgence of Bitcoin is bringing crypto investors back into the mix, according to data from Robinhood.
In a filing after-hours on Monday, the company said that Robinhood investors put in $1.4 billion of net deposits in November and that crypto trading volumes were 75% above October levels.
That news lifted Robinhood shares more than 10% on Tuesday, and the stock continued to climb from there, adding another 7% on Wednesday at an even higher volume.
On Thursday, the stock gained 1.5% after it launched crypto trading in the EU, a well-timed move, given the recent rise in crypto prices. Robinhood offers buy-and-sell support for more than 25 cryptocurrencies, and it says it has the lowest-cost crypto trading platform in the EU on average.
Will the rebound continue?
Bitcoin has edged slightly from its peak earlier this week, but the leading cryptocurrency could easily swing again, especially if news on a potential ETF emerges.
Robinhood's business is highly correlated with interest in the stock market and crypto trading, and a sustained boom in crypto is likely to beckon more investors back to Robinhood.
As an example, Robinhood had 11.7 million monthly active users in 2020. That spiked to 17.3 million in 2021 amid the surge in crypto and growth stocks but then fell to 11.4 million in 2022 as stocks and crypto crashed. Assets under custody also followed a similar trajectory.
There's another reason why investors are excited about Robinhood. The company finally turned in its first generally accepted accounting principles (GAAP) profit in the second quarter, benefiting from increased interest income and cost-cutting efforts.
It returned to a loss in the third quarter, but the Q2 profit shows that the bottom line could soar if crypto interest continues to rise, as there's a lot of leverage in the company's business model.
